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Nobody cared much about International Rectifier's (NYSE:IRF) announcement in early July that it had canned its CFO and head of international sales and marketing in the wake of an investigation into "accounting irregularities." At first, as I wrote at the time, its stock went up on the news.

But it got clobbered last week after its CEO was put on leave while the investigation continues.

Then, after the market's close on Friday -- before a three-day weekend -- the company shed light on how the company used its Japanese subsidiary to hide products booked as revenue but not really sold. The NT-10-K reads like a text on how to lie, cheat an steal from shareholders -- and makes you wonder how many other companies are doing something similar but haven't yet been caught. IRF also conceded it stuffed the channel before quarter's end using "verbal deals with distributors.

This is straight from the filing; the emphasis is mine:

The company's Japan subsidiary circumvented established controls and process to record false or premature sales by creating fictitious customer purchase orders in the existing control system. These orders were diverted by the customer service function when the shipments arrived in Japan at the Company's freight forwarder and then redirected to multiple third party warehouses that were not reflected on the company's books ("off-books warehouses.") The inventory was stored in the off-books warehouses until the Japan subsidiary could either re-sell the product to another customer or when the customer, in whose name the order had been entered, placed a bona-fide order for such products. When the Japan subsidiary received an actual customer purchase order, the order was initially fulfilled from inventory in the off-books warehouses. The customer service personnel created an off-books database with managing the fulfillment of the orders through the off-books warehouses. If a real order could not be filled through the off-books warehouses, then the Japan subsidiary would place the order through the company's normal purchase order system. Part of the cash received for actual accounts receivable was applied to fictitious accounts receivable. In addition, sales management entered into a number of arrangements at quarter ends with certain distributors to take excess product on verbal terms that included extended payment terms and/or an understanding that product would be taken back at the distributor's request.

P.S.: In July Gradient Analytics, in a report to clients, pegged the looming accounting problems to Japan. One dead giveaway, according to Gradient, was a 10-K disclosure of "extended payables" in Japan.